May 11, 2010

Where’s the Boss at Rescued Firms?

The chief executives of some of the nation’s most troubled companies—those bailed out by the U.S. government—don’t report to work many days at corporate headquarters. They live too far away.

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Reuters

AIG’s CEO Robert Benmosche
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Robert Benmosche, chief executive of Manhattan-based American International Group, is a resident of Florida. Michael Carpenter, chief of GMAC Financial Services in Detroit, lives most of the year in Greenwich, Conn., and prefers to work in New York. And Sergio Marchionne, the Fiat SpA chief who last year also assumed the CEO role of Chrysler Group LLC, divides his time between Italy and Detroit.

The flexibility to live hundreds of miles from the office has emerged as a key perk in the bailout era. In part due to public scrutiny, companies that received U.S. assistance have cut compensation and curbed other traditional benefits such as country-club memberships, private security and personal use of corporate jets. Remote living and working arrangements are among the best things the companies can offer for posts that are fraught with political risk.

Since becoming chief executive of AIG last summer, Mr. Benmosche has maintained a head-spinning travel schedule that has kept him away from the government-controlled insurer’s downtown Manhattan headquarters for at least half of his working hours. The 65-year-old remains a resident of Florida, a state that doesn’t impose personal income tax, and he has no intention of changing his residency, according to a person familiar with his thinking.

GMAC’s Mr. Carpenter gets to the company’s Detroit headquarters about once a month. Chrysler’s Mr. Marchionne spends more than half of his time at Chrysler’s headquarters, and he owns a condo outside Detroit. Edward Whitacre, head of General Motors Co., resides in San Antonio, but keeps an apartment near GM headquarters in Detroit, where he works most of the time.

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Associated Press

Edward Whitacre, head of Detroit’s General Motors, lives in San Antonio.
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Bailed-out companies, of course, aren’t the first or only ones to be run by absentee CEOs. When Starwood Hotels & Resorts Worldwide Inc. was run by Steven Heyer from 2004 to 2007, the company set up an Atlanta office for the CEO because he didn’t want to relocate to its headquarters in White Plains, N.Y.

The management challenges associated with turning around the current crop of troubled firms are especially daunting.

Management experts disagree over whether an extreme commute is harmful. Some say a CEO needs to travel extensively to run a far-flung enterprise, and technology allows the boss to connect to headquarters at any hour. “Where the residence is doesn’t have a whole lot of meaning,” says Roger Brunswick, managing partner or New York leadership-advisory firm Hayes Brunswick & Partners.

But CEOs who travel frequently may have less time to connect in person with other top executives and rank-and-file employees. There is the additional danger of hurting employee morale, says organizational psychologist Ben Dattner, founding principal of Dattner Consulting LLC. “It’s a little bit like the general being based in a comfortable location while the troops are on the front lines,” he says.

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Associated Press

Bank of America CEO Brian Moynihan keeps a Boston office near his Wellesley, Mass., home, has an office at the bank’s Charlotte, N.C., office, and one in Manhattan at the company’s new executive floor.
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At Bank of America Corp., which recently exited the federal government’s Troubled Asset Relief Program, newly appointed CEO Brian Moynihan has three offices. He put up family photos at the bank’s Charlotte, N.C., headquarters, and he keeps space in downtown Boston, a short drive from his home in Wellesley, Mass. Mr. Moynihan also intends to spend more time working from Midtown Manhattan, where the company is completing work on a new building and new executive floor that will house the new CEO when he is in town. The seating chart for the 50th-floor lists an office as belonging to “Brian Moynihan/visitor.”

Frequent CEO absences can generate anxiety about the security of the headquarters city. During Mr. Moynihan’s first few months on the job, he spent considerable time away from Charlotte, traveling to New York and Washington. That prompted open speculation inside the company about whether the headquarters could gravitate to the Northeast, say people close to the company.

The 50-year-old doesn’t want to move his wife and children, says one person familiar with his thinking. He recently started renting an apartment in downtown Charlotte to use when he is in town. Publicly, he has ducked the question of whether he will move permanently to Charlotte, where between 10,000 and 15,000 of the company’s employees are based.
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Mr. Moynihan declined to comment. A Bank of America spokesman said many senior executives, including its CEO, “spend a great deal of time away from home and from their assigned offices.” Employees and customers “around the globe appreciate the direct contact. It’s the modern-day version of the age-old practice of management by walking around.”

People close to Mr. Moynihan say the work on the New York office doesn’t mean Charlotte will lose its designation as the bank’s home. They note that his universal office phone number will carry the Charlotte area code.

At GMAC, the movements of former CEO Alvaro de Molina caused some confusion about the company’s true home. Mr. de Molina explored moving the firm’s headquarters from Detroit to Charlotte, where he lived, and added hundreds of employees there as he recruited heavily from Bank of America. He also signed a deal to plaster the name of GMAC’s Ally Bank subsidiary on a Charlotte skyscraper.

The move raised tension inside the company even after Mr. de Molina assured Michigan Gov. Jennifer Granholm that Detroit would remain GMAC’s home, say people familiar with the situation. Mr. de Molina was ousted by directors in November, and Mr. Carpenter canceled a public unveiling of the new Charlotte office space in December, worried it wouldn’t sit well given GMAC’s receipt of about $16 billion in federal bailout funds.

A GMAC spokeswoman says current CEO Mr. Carpenter’s arrangement, in which he frequently works from New York, is not unusual. Three of the previous four CEOs have been based in New York, she says. GMAC employs 300 in the New York area and 1,300 in Detroit, out of a total of 18,800.

At AIG, Mr. Benmosche was readying a plan early this year to relocate his personal office to a skyscraper in Jersey City, N.J., which houses some of the insurer’s back-office functions, according to people familiar with the matter. Most of AIG’s top executives would have remained at the company’s lower Manhattan headquarters, even though AIG last year sold its 66-story building at 70 Pine St.
Remote Control

It’s been hard to attract chief executives to companies that have received government bailouts. Boards at GMAC, GM and AIG are letting them live in locations removed from company headquarters. See a map.

Mr. Benmosche is known within AIG for his hands-on style, and he frequently meets with employees in locales such as Houston, Los Angeles and London. He wanted to move his office across the Hudson River in part because it was closer to the New Jersey airports he frequently uses, and because working in New Jersey could help him stay outside New York on certain days, people familiar with the matter say. The CEO has homes in Suffern, N.Y., and Boca Raton, Fla., where he has been a resident since 2006, and he owns a property and vineyard in Croatia.

If Mr. Benmosche is physically present in New York for more than 183 days during a year, his world-wide income would be subject to New York taxes. Mr. Benmosche has the highest pay package—valued at up to $10.5 million annually—among bailed-out U.S. companies that fall under the jurisdiction of the U.S. pay czar.

The Jersey City plan, in development through February, was viewed negatively by several AIG insiders who were concerned about splitting the management team across two locations, according to people familiar with the matter. In March, the planned move was scrapped by AIG’s chief administrative officer.

An AIG spokesman says the company “is in the midst of reviewing its space needs in light of its sale of 70 Pine St. and the need to relocate employees from it by year’s end.” He added that while “a comprehensive study has only recently begun, AIG intends to maintain its corporate headquarters in lower Manhattan.”
—David Enrich, Sharon Terlep, Kate Linebaugh and Matt Dolan contributed to this article.

Write to Dan Fitzpatrick at dan.fitzpatrick@wsj.com and Serena Ng at serena.ng@wsj.com